Alcoholic Drinks in Lithuania

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Executive Summary

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All categories within alcoholic drinks register declines in total volume sales in 2016

Alcoholic drinks is going through tough times in Lithuania. The declining population and stricter regulation of the market dragged down volume sales in all categories within alcoholic drinks in 2016. Also, a relatively short and cold summer season, the introduction of a deposit system for single-use packaging, the emerging health and wellness trend and the entry of the Lidl low-price discounter chain were other factors behind the decreasing volume sales of companies operating in alcoholic drinks in 2016.

A ban on selling alcoholic drinks through forecourt retailers, further increases in excise taxes and a new prohibition from 1 November 2016 on displaying discounts on alcoholic drinks are believed to be only the first moves of policymakers to reduce alcohol consumption in the country. The stricter regulatory environment negatively affected sales of alcoholic drinks in 2016, while the newly elected majority in the Seimas identified reducing the consumption of alcohol in the country as one of its key priorities over the forecast period. Meanwhile, the increasing prices of alcoholic drinks led to growing scope for private imports from neighbouring Poland, and created favourable conditions for growth in illegal trade.

Unfavourable market conditions lead companies to focus more on exports and/or other business divisions

Local companies accounted for a larger share of sales of alcoholic drinks in 2016, yet premiumisation benefited the performances of well-known imported brands. Nevertheless, contracting domestic consumption and no signs of market recovery encouraged local producers to focus more on exports by investing in new technological equipment, product design and promotion in foreign countries to meet international quality standards. Moreover, in light of decreasing sales of alcoholic drinks, other business divisions, such as soft drinks, have become an increasingly important source of revenue for companies operating within alcoholic drinks in Lithuania.

Lidl opens its first stores in Lithuania

In May 2016, Lidl started its operations in Lithuania. Despite a low number of stores in the country, the new entrant has managed to establish a strong position in modern grocery retailing. The arrival of Lidl has become a headache not only for retailers, but also for some fmcg companies, including those operating in alcoholic drinks, as the discounter chain has a wide variety of private label products which, due to their competitive pricing, are strengthening their positions at the expense of branded products. Meanwhile, further expansion of the Lidl store network in the country is set to increase the share of private label in alcoholic drinks in Lithuania.

Retail volume sales are expected to decline over the forecast period

In October 2016, the newly elected majority in the Lithuanian Seimas stated its aim to drastically reduce alcohol consumption in the country over the forecast period by implementing new laws restricting the sale, consumption and promotion of alcohol. Also, a drastic increase in excise taxes from 1 March 2017 led to significant growth in the unit prices of all types of alcoholic drinks, with further rises in excise duty planned on an annual basis. The unfavourable legislative environment, aligned with negative demographic trends, will negatively affect the performance of all alcoholic drinks categories, with industry experts estimating a huge contraction in total legal consumption over the forecast period.

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